The foregoing data are consistent with the following performance indicators which reflect that Almarai has achieved better profitability levels for the year 2012 as compared to Anaam: Of the two companies, Almarai provided better returns for its shareholders for the year 2012. The following tabulation shows the standard deviation of the two companies: Stock prices of Anaam for 2012 turned out to have higher standard deviation, which peaked in July 2012 at 7.297. Closing at SAR 36.02 in June 2012, Anaam shares went up by SAR 10.32 or 28.65% in July 2012 in response to the approval by the company’s General Assembly of the proposed capital increase which was seen to boost its liquidity and profitability. In comparison, Almarai’s equivalent figures deliver the highest point in March 2012 at 4.271. From its closing price of SAR 60.81 for February 2012, Almarai’s stock rose to SAR 65.84 at the end of March 2012. This may have been the market’s positive reaction to the news declared on 28 March 2012 regarding Almarai’s increased stake in one of its subsidiaries, Global Co. Anaam stock prices are more volatile and, therefore, bring in more risk compared to Almarai’s. Incidentally, the beta figures of the two companies – 0.64 for Almarai and 1.39 for Anaam – consistently reflect that Anaam has more price volatility. 2. Capital Structure There are material differences in the annual levels of indebtedness of Almarai and Anaam for the years 2008 to 2012. Almarai has turned out to be a highly leveraged company, with its long-term debt to equity ratios ranging from 70.13% in 2010 to a high of 96.10% in 2012. This means that Almarai’s creditors have lent the company SAR 96.10 (for 2012) for every SAR 100 invested by the shareholders in the company. In fact, Almarai’s total debt to equity ratio – also called the leverage ratio – has consistently been over 100% from 2008 to 2012, peaking at 150.31% in 2012. This means that the company’s total liabilities, both current and long-term, is higher than the company’s equity by as much as half of it (equity). It is, thus, not surprising that the total debt to total assets ratios of the company from 2008 to 2012 yield figures above 50%. In the same year when both the long-term debt to equity ratio and the total debt to equity ratio are at their highest during the 5-year period, the total debt to total assets ratio for the year stand out as the highest. By the year 2012, 61.32% of the company’s assets are financed by its creditors. The fact that Almarai is highly leveraged is further demonstrated by a comparison between the company’s leverage ratios and those of the industry that the company belongs to. Almarai’s total debt to equity ratio is 150.31% while the equivalent for the Agriculture and Food Industries Sector is 123.69%. Almarai’s long-term debt to equity ratio is 96.10% as against the Sector’s 56.49%. In the light of the foregoing, it is clear that Almarai has managed to maintain the confidence of its investors and creditors in spite of its high-leverage capital structure. The company has successfully ensured that its cash flows are stable and are capably generating all the cash requirements of its operations and treasury. As cited in the company’s Board Report for the year ended 31 December 2012, it is its efficiently controlled cash flows that have given Almarai access to additional financing
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1. Returns and Volatility for 2012 The monthly returns of Almarai Corporation and Anaam International are as follows: Both Almarai Co. Ltd. (or “Almarai) and Anaam International Holding Group Co. (or “Anaam) generated profits during the year 2012. However, only Almarai declared dividends for the year at SAR 1.25 per share; this represents returns of 0.020 or 2% on its market price…
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